The sale of the Arsenal properties has come under fire in recent weeks: the Riigikogu Anti-Corruption Select Committee is planning to look into the transaction following what could at worst be suspicions of corruption. Minister of State Administration Mihhal Korb is also planning to take steps.
The government decided to split state-owned defense contractor AS E-Arsenal in 2009. A subsidiary to remain active in the sector was created alongside parent company AS Erika Neli the task of which was to manage the property that now lies under the Arsenal shopping center.
In order to make it possible for E-Arsenal OÜ to maintain its principal activity, it was decided to transfer Erika Neli to professional real estate manager RKAS. The agency officially took possession of nine plots on Erika and Tööstuse streets in September of 2011.
The public auction for the land took place in May of 2012 and saw RKAS sell the real estate to a company in which entrepreneur and Reform Party member Rain Rosimannus had a hidden stake for years.
MP Keit Pentus-Rosimannus (Reform Party) was a member of the supervisor board of RKAS from June of 2007 to May 2011. That was the period during which preparations were made and negotiations held concerning the transfer of the Erika Neli properties to RKAS.
When asked to which extent she was up to speed on matters and at which length the supervisory board discussed the sale, Pentus-Rosimannus answered laconically: “The transfer of the land took place months later, and I was not a member of the board either when the finance ministry transferred the properties to RKAS in August 2011 or later, during the public sale.”
Pentus-Rosimannus refused to say whether she had knowledge of her partner Rain Rosimannus' possible business interests in the development of the Arsenal shopping center. The former minister only said that her husband obtained a 4.65 percent holding in the shopping mall in the form of an option in 2012.
Pentus-Rosimannus left the supervisory board to become environment minister after the March 2011 elections. How much could she have known about the transfer? Chairman of the supervisory board at the time Taavi Rõivas (Reform Party) said the board only discussed the Erika Neli properties on two occasions.
It was decided during the first of those meetings in August of 2011 to take over Erika Neli AS, while the decision to transfer the plots in the future was made at the second sitting on February 2, 2012. “RKAS has no practical need to maintain ownership of the company,” the minutes read. “Property owned by AS Erika Neli (9 plots) will be sold as a single package. Cash flow will come to AS Erika Neli the liquidation of which will later create a positive cash flow for RKAS.”
Rõivas emphasized once more that the activities of the supervisory and management boards of RKAS have been proper and transparent. Rõivas presented Riigikogu Anti-Corruption Select Committee chairman Artur Talvik with all records of supervisory board meetings during which Erika Neli real estate was mentioned. The former PM is scheduled to give statements to the committee tomorrow.
Talvik said it needs to be investigated how the transaction was conducted. “We want RKAS to tell us whether holding a public auction for this kind of property in just three weeks is standard practice, or whether things were hurried,” Talvik specified. “Additionally, it needs to be ascertained whether the land was sold for an unreasonably low price.”
The committee chairman added that Rosimannus' decision to participate in financing the shopping center as well as the fact he registered his holding as an option also raises questions. Head of Arsenal Center Aadu Oja said he invited Rosimannus to participate because the real estate market had not yet fully recovered from the crisis in 2012, and it was very difficult to find investors.
“To tell you the truth, I approached everyone whom I believed could be even remotely interested in the project in that short three-week window,” Oja said. “I had to make deals with more than ten people before I had the money.” Oja added that one needs to be especially diligent when dealing with city or state agencies, which is why the Riigikogu committee's initiative to investigate the sale of Arsenal is entirely sensible. “We are open to cooperation and can say with our hands on our hearts that we have done everything properly in the purchase process,” he said.